Some of the accounts appearing in the year-end financial statements of Gino, Inc., appear below.

This list includes all of the company’s current assets and current liabilities.

Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,500,000

Accumulated depreciation: equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,000

Notes payable (due in 120 days) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,000

Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240,000

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,000

Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,000

Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,000

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,000

Mortgage payable (due in 20 years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 650,000

Salaries payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,800

Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... . . 20,000

Income taxes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . 14,400

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217,000

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195,000

Unearned revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000

Unexpired insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 8,000

Instructions

a. Prepare a schedule of the company’s current assets and current liabilities. Select the appropriate items from the above list.

b. Compute the current ratio and the amount of working capital. Explain how each of these measurements is computed. State, with reasons, whether you consider the company to be in a strong or weak current position.